According to the application by the joint and several administrators of CEFC Shanghai International Group Limited (the “Administrators”) for seeking recognition and assistance in Hong Kong, the Hon Mr. Justice Harris in the High Court of the Hong Kong Special Administrative Region (HKSAR) (“Court” or “High Court”) issued the Order on December 18, 2019 and the Decision accordingly on January 13, 2020, in which the Court recognized the liquidation in the Mainland of the People’s Republic of China (the “Mainland”) and the appointment of the joint and several administrators appointed by Shanghai No.3 Intermediate People’s Court (“Shanghai Bankruptcy Court”) and recognized that the Administrators have and may exercise the relevant powers in the HKSAR.
It is notable that, save as the recognition of the liquidation in the Mainland and the powers of the Administrators appointed by the court of the Mainland by the Court, the Court also gave judicial assistance via ordering the followings: For so long as the Company remains in liquidation in the Mainland of the People’s Republic of China, no action or proceeding by any party other than the Administrators shall be proceeded with or commenced against the Company or its affairs, property or assets within the jurisdiction of this Court, save with the leave of this Court and subject to such terms as this Court may impose.
CEFC Shanghai International Group Limited (“CEFC Shanghai”) is a Mainland-incorporated investment holding company and is part of a conglomerate whose business includes capital financing petroleum refining and infrastructure. On November 15, 2019, pursuant to the Shanghai Bankruptcy Court’s order under the Enterprise Bankruptcy Law (“EBL”), the Company went into insolvent liquidation. On November 24, 2019, the Shanghai Bankruptcy Court appointed the Administrators.
The Company’s assets in Hong Kong include a claim against its Hong Kong subsidiary, Shanghai Huaxin Group (Hong Kong) Limited (“HK Subsidiary”), amounting to some HK$7.2 billion (“HK Receivable”). As the HK Subsidiary is in liquidation in Hong Kong, the Company has submitted a proof of debt in respect of the HK Receivable in the HK Subsidiary’s liquidation. After their appointment, the Administrators discovered the following: On August 24, 2018, a creditor obtained a default judgment against the Company in Hong Kong for some €29 million. On August 12, 2019, in order to enforce the Default Judgment, the creditor obtained a garnishee order nisi in respect of the HK Receivable.
In order to prevent the creditor from obtaining garnishee order absolute, according to the application by the Administrators, on December 10, 2019, Shanghai Bankruptcy Court issued the Letter of Request urgently to the High Court to request the High Court to recognize the appointment of the Administrators and to allow that the Administrators, to the greatest extent as permitted under Hong Kong laws, shall be entitled to the rights under the EBL and judicial interpretations. Based on the Letter of Request and other relevant materials, the Administrators accordingly made an urgent application to the High Court for recognition and assistance.
It is the first time in history that a liquidation in the Mainland was recognized by a Hong Kong court in the HKSAR. It is also the first time in the history of Hong Kong courts to provide judicial assistance to the Mainland liquidation proceedings. This case will also be referred as a precedent in the HKSAR and will be cited in similar cases in the future.
As the world’s economies become more integrated and the global economy subsequently grows, more and more complex mainland bankruptcy procedures with the nature of “cross-border” will emerge, which will bring certain challenges to bankruptcy administrators.
AllBright Law Offices, King & Wood Mallensons and Fangda Partner, acting as the Administrators of the CEFC Bankruptcy Case, led Hong Kong co-counsels in completing all matters in both of the Mainland and Hong Kong, including the production and application of application letters from the Mainland court, appointment of a representative to complete the affidavits in Hong Kong, submission of the relevant Mainland judicial documents, provide legal opinion on the provisions of the Mainland bankruptcy system and precedents, participation in the hearing proceedings in the Hong Kong, etc.
The legal team of AllBright Law Offices is composed of senior partner Linhai (Lawrence) Zhu, Gao Zhang and Lianfang Fu, as well as senior attorney-at Law Zheng Yang, Shaodong Zhang and Mengyun Qiu etc.